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Question
For a business that uses the allowance method of accounting for uncollectible receivables:
a. Journalize the entries for the following transactions:
(1) Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.
(2) In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3) In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4) In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.
b. Redo the entries in steps (a2), (a3), and (a4), assuming the company uses the direct write-off method.
Answer
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